IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

RS INDUSTRIES, INC. and SUN 

MECHANICAL CONTRACTING, INC.,

Plaintiffs/Appellants, 

 

v.

 

J. SCOTT and BEVERLY CANDRIAN, 

Defendants/Appellees.

No. 1 CA-CV 15-0035

Appeal from the Superior Court in Maricopa County

No. CV2014-009512

The Honorable Katherine M. Cooper, Judge

AFFIRMED 

COUNSEL

Haralson, Miller, Pitt, Feldman & McAnally, PLC, Tucson

By Gerald Maltz

Counsel for Plaintiffs/Appellants

Rusing, Lopez & Lizardi, PLLC, Tucson

By Michael J. Rusing, P. Andrew Sterling

Co-Counsel for Defendant/Appellee

Thomas A. Zlaket, PLLC, Tucson

By Thomas A. Zlaket

Co-Counsel for Defendant/Appellee
RS INDUSTRIES, et al. v. CANDRIAN

Opinion of the Court

2

OPINION

Presiding Judge Diane M. Johnsen delivered the opinion of the Court, in 

which Judge Patricia A. Orozco and Judge Kenton D. Jones joined.

J O H N S E N, Judge:

¶1 After an arbitrator ruled on several claims and made a 

significant award of attorney's fees and expenses, the superior court 

confirmed the award and granted more fees and expenses. On appeal, the 

parties dispute whether their arbitration agreement and applicable law 

authorize the awards of fees and expenses. We affirm.

FACTS AND PROCEDURAL BACKGROUND

¶2 Scott and Beverly Candrian founded Sun Mechanical 

Contracting, Inc., a Tucson plumbing and HVAC contractor. In 2003, the 

Candrians entered into a series of agreements with RS Industries, Inc., an 

Iowa company, by which the Candrians exchanged their stock in Sun for a 

25 percent interest in RS. Mr. Candrian agreed to serve as president of Sun, 

now wholly owned by RS, for ten years and, at the end of that period, RS

would buy back the Candrians' stock in RS. Mr. Candrian was guaranteed 

a position on RS's board of directors so long as he owned RS stock; 

meanwhile, the Candrians continued to serve on the Sun board.

¶3 In late 2012, before time for the stock buy-back, RS accused 

Mr. Candrian of breaching his employment agreement and alleged that, as 

a result of his breach, the Candrians' stock in RS had no value. In response, 

the Candrians filed suit in federal district court, asking it to declare the 

value of the stock; several months later, Sun sued the Candrians in superior 

court, alleging $10.7 million in damages for breach of the employment 

agreement and seeking enforcement of newly passed corporate resolutions 

purporting to oust the Candrians from the Sun board. A month later, the 

district court dismissed the complaint in favor of arbitration. The parties 

eventually negotiated an arbitration agreement covering all their disputes, 

and the superior court stayed the state action pending arbitration.

¶4 The parties selected a Phoenix lawyer as their arbitrator. In 

the two court cases, they had made numerous filings and litigated an 

application for a temporary injunction. They continued to battle during the 
RS INDUSTRIES, et al. v. CANDRIAN

Opinion of the Court

3

run-up to the four-day arbitration. With several million dollars at stake, 

they retained expert witnesses, took depositions, propounded and 

responded to discovery requests, litigated discovery disputes, and briefed 

a motion by the Candrians for summary judgment. The arbitrator 

ultimately decided nearly all issues in favor of the Candrians, concluding

they were owed $5,006,245 for their RS stock and that Mr. Candrian was 

due $77,000 in unpaid wages.

¶5 Having prevailed on the merits, the Candrians filed an 

application seeking $1,032,411.50 in attorney's fees and $211,240.41 in 

"costs." Over RS's objection, the arbitrator granted the Candrians nearly 

every dollar they had sought, citing as authority the arbitration agreement, 

RS bylaws, Iowa indemnity laws (one of the contracts referenced Iowa law)

and Arizona Revised Statutes ("A.R.S.") section 12-341.01(A) (2016).

1 RS 

then filed a motion in superior court to vacate the arbitrator's award of

attorney's fees and costs; the Candrians moved to confirm the award. After 

briefing and oral argument, the superior court denied the motion to vacate 

and confirmed the arbitration award in its entirety. The court then granted 

the Candrians attorney's fees and expenses of $54,781.33, along with taxable 

costs of $243, incurred in the confirmation proceeding.

¶6 RS timely appealed. We have jurisdiction pursuant to Article 

6, Section 9, of the Arizona Constitution and A.R.S. §§ 12-2101(A)(1) (2016) 

and -2101.01(A)(6) (2016).

DISCUSSION

A. Arbitrator's Award of Attorney's Fees and Costs.

1. Attorney's fees.

¶7 Arizona public policy favors arbitration as a speedy and 

affordable means of resolving disputes, and judicial review of an 

arbitrator's award is substantially limited by statute. City of Cottonwood v. 

James L. Fann Contracting, Inc., 179 Ariz. 185, 189 (App. 1994). An arbitrator's 

decisions regarding questions of law and fact are final, and will not be 

disturbed unless the arbitrator has purported to decide a matter that is

beyond the scope of the issues submitted for arbitration. Smitty's SuperValu, Inc. v. Pasqualetti, 22 Ariz. App. 178, 180-81 (1974); see also Hirt v. 

Hervey, 118 Ariz. 543, 545 (App. 1978) ("[A]n arbitration award is not subject 

to attack merely because one party believes that the arbitrators erred with 

 

1 Absent material revision after the relevant date, we cite a statute's 

current version.
RS INDUSTRIES, et al. v. CANDRIAN

Opinion of the Court

4

respect to factual determinations or legal interpretations."). Indeed, under 

Arizona's version of the Revised Uniform Arbitration Act, A.R.S. §§ 12-3001

et seq., as relevant to this appeal, an aggrieved party may petition the 

superior court to vacate an arbitration award only if the "arbitrator 

exceeded the arbitrator's powers." A.R.S. § 12-3023(A)(4) (2016). We review 

the superior court's decision to confirm an arbitration award in the light 

most favorable to upholding the decision and will affirm unless the 

superior court abused its discretion. See Atreus Communities Group of Ariz. 

v. Stardust Dev., Inc., 229 Ariz. 503, 506, ¶ 13 (App. 2012). 

¶8 RS does not contest the arbitrator's findings on liability and 

damages, but argues the arbitrator exceeded his authority when he 

awarded attorney's fees and expenses. By statute, "[a]n arbitrator may 

award reasonable attorney fees and other reasonable expenses of 

arbitration only if that award is authorized by law in a civil action involving 

the same claim or by the agreement of the parties to the arbitration 

proceeding." A.R.S. § 12-3021(B) (2016). In that regard, § 12-3021(B) grants 

an arbitrator the same power the superior court has to award fees in a civil 

action. See Sanders v. Boyer, 126 Ariz. 235, 241 (App. 1980) (general rule is 

that attorney's fees are not allowed "except where expressly provided for 

by either statute or contract").

¶9 The arbitration agreement the parties negotiated stated:

All Parties have the right to apply to the Arbitrator for 

recovery of reasonable attorney's fees incurred in connection 

with the arbitration, and also the authority to apply for 

reasonable attorneys' fees previously incurred in the lawsuits 

referenced in Recitals C [the prior district-court proceeding] 

and E [the prior state-court proceeding], under any applicable 

statute, rule, or contract.

After prevailing in the arbitration, the Candrians sought $611,693 in fees 

incurred in the two lawsuits before the arbitration began and $420,718.50 

incurred in the arbitration. The arbitrator awarded them fees of 

$1,032,299.50.

¶10 Although RS broadly contends the arbitrator exceeded his 

powers, each argument RS raises to the fees award is a contention that the 

arbitrator ruled incorrectly, not that he lacked the power to rule. For 

example, RS argues the dismissals of the two lawsuits constituted res 

judicata against the Candrians, barring any fee award to them. It argues

A.R.S. § 12-341.01, the Arizona statute that allows a court to grant fees to 
RS INDUSTRIES, et al. v. CANDRIAN

Opinion of the Court

5

the prevailing party in a "contested action arising out of a contract," did not 

apply because the buy-sell agreement specified that Iowa law would 

govern and the other claims were not sufficiently intertwined with claims 

under the employment agreement, to which Arizona law applied. And it 

argues the Iowa laws and the corporate bylaws the arbitrator cited do not 

permit a fees award under the circumstances presented here. All of these 

are arguments why the arbitrator assertedly erred in deciding to award 

fees, not arguments why he exceeded his authority in doing so.

¶11 RS further contends that under the language in the arbitration 

agreement quoted above, no fees could be granted except as provided by 

"applicable statute, rule, or contract." The Candrians interpret the 

agreement differently; they argue the "applicable statute, rule, or contract" 

language was intended to apply to a request for fees incurred in the 

lawsuits but not to a request for fees incurred in the arbitration itself. 

Regardless, by their agreement, the parties granted to the arbitrator the 

power to resolve any dispute about the meaning of the fees provision. 

Pursuant to A.R.S. § 12-3023(A), on appeal, we will not review the merits of 

an arbitrator's factual findings or legal conclusions. See Atreus Communities,

229 Ariz. at 506, ¶ 13 ("[T]he arbitrator's decisions are final and binding as 

to both issues of fact and law, regardless of the correctness of the decision.").

¶12 RS failed to show the arbitrator exceeded the powers granted 

to him by the law and the agreement to award reasonable attorney's fees 

incurred in the arbitration proceeding and in the two lawsuits that preceded 

the arbitration. See A.R.S. § 12-3023(A). The superior court accordingly did 

not err in confirming the fees award. 

2. Costs/Expenses.

¶13 The Candrians asked the arbitrator to award them roughly 

$98,600 in expenses incurred in the pre-arbitration lawsuits and $112,600 in 

expenses incurred during the arbitration. The arbitrator's award of 

$211,240.41 in expenses included filing fees, deposition transcripts and 

videographer charges, costs of travel to attend depositions, expert witness 

fees, food and lodging during the arbitration (both sides had Tucson 

lawyers; the arbitration was conducted in Phoenix), copying costs, delivery 

expenses, parking, and the costs of preparing hearing exhibits.

2

 

2 RS argues the arbitrator lacked the power to award computerized 

legal research costs as an expense. But costs of computerized legal research 
RS INDUSTRIES, et al. v. CANDRIAN

Opinion of the Court

6

¶14 As noted, A.R.S. § 12-3021(B) empowers an arbitrator to grant 

a party its "reasonable expenses of arbitration only if that award is 

authorized by law in a civil action involving the same claim or by the 

agreement of the parties to the arbitration proceeding." Because the 

arbitration agreement here said nothing about expenses, the arbitrator had 

the power to award expenses only if authorized by law. This is the same 

rule that governs awards of litigation expenses during court proceedings. 

See Schritter v. State Farm Mut. Auto. Ins. Co., 201 Ariz. 391, 392, ¶ 6 (2001)

("A party to a civil action cannot recover its litigation expenses as costs 

without statutory authorization.").

¶15 By statute, a successful party to a civil action in Arizona is 

entitled to recover "from his adversary all costs expended or incurred 

therein unless otherwise provided by law." A.R.S. § 12-341 (2016). But the 

statutes do not grant the prevailing party a right to recover every manner 

of litigation expense. Under A.R.S. § 12-332 (2016), the prevailing party in 

a civil action in superior court is allowed only its taxable costs, which are 

defined to include:

1. Fees of officers and witnesses. 

2. Cost of taking depositions. 

3. Compensation of referees. 

4. Cost of certified copies of papers or records.

5. Sums paid a surety company for executing any bond or 

other obligation therein, not exceeding, however, one per cent 

on the amount of the liability on the bond or other obligation 

during each year it was in force.

6. Other disbursements that are made or incurred pursuant 

to an order or agreement of the parties. 

A.R.S. § 12-332(A)(1)-(6); see Reyes v. Frank's Serv. & Trucking, LLC, 235 Ariz. 

605, 608, ¶ 6 (App. 2014) (whether an expense is recoverable as a taxable 

cost is reviewed de novo).

 

are recoverable as attorney's fees. Ahwatukee Custom Estates Mgmt. Ass'n v. 

Bach, 193 Ariz. 401, 404 (1999).
RS INDUSTRIES, et al. v. CANDRIAN

Opinion of the Court

7

¶16 Some but not all of the expenses the arbitrator approved

would be recoverable as taxable costs under § 12-332(A). For example, 

although a party may recover costs it incurs in deposing an opposing 

party's expert witness, the fees it pays its own expert witness are not 

recoverable. See Reyes, 235 Ariz. at 608-09, ¶ 8.3 Other expenses, including 

those incurred for photocopying, facsimiles, shipping and travel expenses,

are not recoverable as taxable costs. See Bennett v. Baxter Group, Inc., 223 

Ariz. 414, 423, ¶ 37 (App. 2010).

¶17 In granting the Candrians' request for expenses, however, the 

arbitrator cited Iowa indemnity statutes and RS bylaws. Iowa law allows a 

corporation to indemnify a director against liability under certain 

circumstances. See Iowa Code § 490.851(1) (2016). And the RS corporate 

bylaws provided that RS "shall indemnify each director . . . to the fullest 

extent possible, against all obligations, including attorney's fees . . . and 

reasonable expenses actually incurred by such director . . . upon claim made 

by [RS], any stockholder thereof or by any third party relating to his or her 

conduct as a director."

¶18 As with the attorney's fees award, RS argues the arbitrator 

exceeded his powers by granting the Candrians' request to be reimbursed 

for expenses that are not taxable costs. But as with the attorney's fees 

award, RS's argument in reality is that the arbitrator erred in interpreting 

the legal authorities he cited as allowing the expenses. By entering into the 

arbitration agreement, RS agreed the arbitrator's decisions in matters of law 

would be final. See Atreus Communities, 229 Ariz. at 506, ¶ 13. Under A.R.S. 

§ 12-3023(A), we will not review whether the arbitrator correctly 

interpreted Iowa law and the RS bylaws to require RS to indemnify the 

Candrians for non-taxable expenses they incurred in the lawsuits and the 

arbitration. Accordingly, the superior court did not err in confirming the 

arbitrator's award of expenses.

 

3 Recoverable costs associated with depositions may include fees paid 

for court reporters and transcripts, reasonable travel expenses for attorneys 

and court reporters, and photocopies of deposition records, so long as they 

are "reasonably and necessarily incurred." Reyes, 235 Ariz. at 608-09, ¶¶ 8-

12. Expenses associated with recording depositions are eligible for recovery 

as a taxable cost, "[b]ut when a party has chosen to incur expenses for both 

stenographic and video recording of a deposition, the trial court must 

determine the reasonableness and necessity of those expenses on a case-bycase basis." Id. at 611, ¶ 21.
RS INDUSTRIES, et al. v. CANDRIAN

Opinion of the Court

8

B. Superior Court's Confirmation of the Arbitration Award.

1. Section 12-3025.

¶19 Under A.R.S. § 12-3025 (2016), a party may collect attorney's 

fees and expenses incurred in connection with an action to confirm an 

arbitration award. Subsection C of the statute states:

On application of a prevailing party to a contested judicial 

proceeding under § 12-3022, 12-3023 or 12-3024, the court may 

add reasonable attorney fees and other reasonable expenses 

of litigation incurred in a judicial proceeding after the award 

is made to a judgment vacating an award without directing a 

rehearing or confirming, modifying or correcting an award.

A.R.S. § 12-3025(C). 

2. Attorney's fees.

¶20 The Candrians were successful in confirming the arbitration 

award over RS's vigorous attempt to vacate it under A.R.S. § 12-3023, and 

thus were entitled to their reasonable attorney's fees pursuant to A.R.S. § 

12-3025(C). RS acknowledges the power of the superior court to award fees 

in confirming the award, but argues the amount of fees the court awarded 

was unreasonable. RS contends the Candrians' fee application revealed 

"block-billing" by their lawyers and argues the court should not have 

awarded the fees of all three lawyers who traveled from Tucson to Phoenix 

so that one of them could participate in oral argument on the motion to 

confirm the award.

¶21 We review an award of attorney's fees for an abuse of 

discretion. Motzer v. Escalante, 228 Ariz. 295, 296, ¶ 4 (App. 2011). We will 

affirm the court's award of attorney's fees if there is a reasonable basis for 

doing so. James L. Fann Contracting, 179 Ariz. at 195. Although the better 

practice may be to avoid block-billing when it can be done reasonably, as 

the Candrians contend, no Arizona authority holds that a court abuses its 

discretion by awarding fees that have been block-billed. In its order 

granting the fees, the superior court noted it had reviewed the billing 

statements and found them sufficiently detailed. As for the presence of 

three lawyers at oral argument, the court found the Candrians had offered 

a reasonable explanation: "[T]here was a lot at stake . . . , and it took the 

collective expertise of three attorneys to ensure the best result for their 

clients. Reason enough." RS does not argue the Candrians' lawyers' hourly 

rates were excessive, that the total bill was too large, or that too many hours, 
RS INDUSTRIES, et al. v. CANDRIAN

Opinion of the Court

9

in total, were spent on the matter. Under these circumstances, we cannot 

conclude the court abused its discretion in awarding the Candrians their 

attorney's fees.

3. Expenses.

¶22 The superior court awarded about $3,350 in non-taxable 

expenses incurred in connection with the confirmation proceeding, 

including copying costs, delivery charges, travel and meals. By contrast to 

A.R.S. §§ 12-341 and -332, which allow the court to award a narrow class of 

"taxable" costs, A.R.S. § 12-3025(C) confers on the court a broader power to 

award "reasonable expenses of litigation."

¶23 Section 12-3025 is nearly identical to Section 25 of the Revised 

Uniform Arbitration Act. The comment to Section 25 explains it intended 

to "discourage" unfounded appeals of arbitration awards:

Section 25(c) promotes the statutory policy of finality of 

arbitration awards by adding a provision for recovery of 

reasonable attorney's fees and reasonable expenses of 

litigation to prevailing parties in contested judicial actions to 

confirm, vacate, modify or correct an award. Potential 

liability for the opposing parties' post-award litigation 

expenditures will tend to discourage all but the most

meritorious challenges of arbitration awards.

Unif. Arbitration Act § 25 cmt. 3 (Nat'l Conference of Comm'rs on Unif. 

State Laws 2000).

¶24 Interpreting § 12-3025(C) consistent with this underlying 

policy, we conclude that "expenses" as used in the statute necessarily must 

be broader than "costs" as used in §§ 12-341 and -332. Allowing a prevailing 

party to collect reasonable expenses of litigation beyond taxable costs serves 

the policy of promoting the finality of arbitration awards and deterring relitigation of arbitrable issues. Moreover, as the comment to Uniform 

Arbitration Act Section 25 explains, parties may, if they choose, agree to 

waive this provision. Unif. Arbitration Act § 25 cmt. 6 (Nat'l Conference of 

Comm'rs on Unif. State Laws 2000) ("Section 25(c) is a default rule only 

because it is waivable . . . . If the parties wish to contract for a different rule, 

they remain free to do so.").

¶25 The parties here did not agree to preclude expense awards in 

connection with confirmation; as a result, the statutory default allowed the 

superior court to award reasonable expenses to the prevailing party.
RS INDUSTRIES, et al. v. CANDRIAN

Opinion of the Court

10

CONCLUSION

¶26 For the foregoing reasons, we affirm the superior court's 

confirmation of the final arbitration award, including the arbitrator's 

awards of attorney's fees and expenses. We also affirm the court's separate 

grant of fees and expenses incurred in the confirmation proceeding. 

Pursuant to A.R.S. § 12-3025(C), we grant the Candrians their costs and 

reasonable attorney's fees on appeal, contingent on compliance with 

Arizona Rule of Civil Appellate Procedure 21.